A J Frost:—This is an income tax appeal in respect of the 1965, 1966 and 1967 taxation years. The case was partially heard in Toronto, Ontario on September 18, 1972 and concluded in Hamilton, Ontario on October 19, 1972.
The evidence herein reflects a situation in respect of which the appellant had no taxable income for the years under review but, nevertheless, tax was levied on gross receipts which tax, under normal circumstances, would have been refunded by the Department of National Revenue had it not been for clerical mishaps either in the filing of the returns or in the reception of the returns by the taxing authorities.
The assessments came as a blow to the taxpayer who had been making declarations since 1962 and never had anything to pay and then suddenly, to his amazement, he was faced with a tax levy of $26,250.97 although he knew with reasonable certainty that he had no income subject to taxation in Canada. Nevertheless, the respondent contended that the assessments were issued in accordance with the Income Tax Act.
This is the story. The appellant is a university professor who resided in Canada prior to the years in question, but at all material times relevant to the appeal was a non-resident. He owned property known as the Northcliffe Terrace Apartments in the City of Toronto from which he received gross rental returns but, after capital cost allowances, did not enjoy a net taxable return. The appellant employed two agents in Canada to look after his affairs, (a) a rental manager by the name of Mr Bedder who failed to make the required 15% source deductions pursuant to paragraph 106(1)(d) of the Act, and (b) Mr Allan Pyzer, chartered accountant, who had the responsibility of filing the appellant’s tax returns. It was shown in evidence that all pertinent information was received on time by Mr Pyzer and that he did prepare the returns. The established pattern of procedure appeared to be that the returns were prepared by Mr Pyzer and forwarded to the appellant who signed and returned them to Mr Pyzer for filing. Copies of the “filed” returns were part of Mr Pyzer’s business records. The appellant owed no tax provided he complied with the filing provisions of the Act.
An affidavit was filed with the Board, signed by an officer of the Department of National Revenue, and the Board accepted it as prima facie proof of failure to comply with the filing requirements of the Act under subsection 136(6).
In sum, the evidence indicated that the appellant signed the necessary returns, forwarded them to his agent, a chartered accountant, who contended that he mailed them in the ordinary course of business. The Department claimed however that the returns were not received. Under paragraph 106(1 )(d) of the Act, every non-resident person shall pay an income tax of 15% on rents that a resident person in Canada pays to him or credits to his account, unless he files a return showing no taxable income within two years. Under subsection 110(1) of the Act, a non-resident is permitted to file a return as a resident under Fart I of the Income Tax Act. The respondent’s case rests on whether the appellant did or did not file a return under Part I of the Act. The onus of proving the necessary filing was Clearly on the appellant, and the affidavit filed established a prima facie case for the respondent which was not upset. In view of the unequivocal provisions of the Act, the Board cannot render what it would consider to be an equitable decision in this case. However, I do not hesitate to state that the appellant should be entitled to relief even though no such relief can be given by this Board under the Income Tax Act. The Board therefore brings to the attention of the appellant and his counsel, both of whom are non-residents, that under Canadian law in a case like this relief may be sought and found under the Financial Administration Act.
Appeal dismissed.